Wednesday, June 18, 2014

The Row Persists Over Asset Light Management Structures in the Freight and Logistics Supply Chain

Is There a Real Need for 4PL's or is it Simply Poor 3PL Management
Shipping News Feature

FRANCE – EUROPE – WORLDWIDE – There are those in the freight community who would take exception to some of the views expressed recently by Arthur van Gerven of Menlo Logistics when he spoke at a recent academic conference in Paris organised by the LOG4Green partnership. The Senior Director of Business Development and Key Account Management based in Eindhoven was explaining his rationale to justify employing a 4PL in ‘Managing Risk and Resilience in Sustainable Logistics and Supply Chain Management for Urban Supply’, as opposed presumably to employing one or more 3PL’s.

Now to be fair Mr van Gerven was speaking specifically about the most complex of supply chains, pointing out that several factors - increased complexity, the pressure to become both more efficient and environmentally friendly, as well as the geographical distances involved in such supply chains, all contribute to a greater risk of disruption bringing about a need for increasingly innovative solutions. The Menlo boss sees 4PL as ‘lead logistics provision’ and commented:

“The over-sight provided by a 4PL operator will improve performance in four criteria, which are key to the resilience of any supply chain. The model provides flexibility to achieve rapid reaction to circumstances; predictability in order to maximise optimisation and both cost and carbon efficiency, which promote business and environmental sustainability.”

The argument continues that, whilst outsourcing to a 3PL service provider goes some way to managing the results of supply chain disruption (whether created by a major disaster capable of paralysing a complete production process or more minor localised events such as traffic congestion or labour disputes) a 4PL approach, over-seeing all out-sourced logistics suppliers allows for the identification also of more systematic, process-driven inefficiencies. A good 4PL, he says, is capable of designing solutions to reinforce any complex supply chain.

The counter argument is of course a simple one, by definition the 3PL provider is asset light and there to basically fulfil a management role, controlling those who operate the assets required to allow the supply chain to function efficiently. By employing a 4PL is one reinforcing management of the chain with another layer of oversight or admitting the 3PL one is paying for is not competent to manage the whole operation.

Mr van Gerven waxes lyrical about ‘Value Stream Mapping as part of Lean Methodology having as its primary goals the elimination of waste and creating a road map for continuous improvement’ and says, as a result of employing this philosophy, ‘resilience is built into the supply chain performance and measurement of asset leverage and process efficiency, as well as emission target achievement is continuous and the ability to resist disruption is constantly reviewed. Disaster recovery and contingency planning can then also take place with the confidence that a robust yet flexible supply chain is already in operation’.

Such language leads inevitably to scathing comments from many old school industry players, and even the odd April Fool’s spoof, so the argument rages on, is 4PL a worthwhile reinforcement of supply chain management – or are you just buying fancy phrases and Snake Oil?